Well the 10 year Treasury yield has hit the 2.72% area today while the 20 year bond broke above 5%–the 30 year yield is just below the 5% area.
Interest rates are making it darned tough to ‘make a living’ if you are an income investor. On the other hand those that focus on their income stream instead of share prices continue to have the ability to so some swapping and add a few basis points to your income stream. I, unfortunately, am a total return person–I like to see account balances rise–all the time, and with rates moving higher my gains have been really meager for the last 4 months–running at gains of about .3% per month.
So for me it continues to be perpetual preferreds which are making my life hard—get paid some nice dividends and interest and then turn around and give it back with share price losses. I know I should simply make sure I have solid holdings and watch my monthly receipts–unfortunately I am wired to watch the bottom line–not necessarily logical, but that is the way it is for me.
For those that want stability we all know the answer–be in CDs and MMs or very short duration term preferreds or baby bonds. I think we will see rates move a bit higher yet from here–simply the unknowns in the next 6 months are going to unnerve markets as the Treasury continues to raise new money with debt sales–already more than $100 billion this month. Maybe (maybe) we will see some stability mid-year when we should have a ‘read’ on the new administration.
Do you mean 10 year hit 4.72?
Buy 6-7% divvies and you earn good income. Unless you sell. I’ll continue to buy them as I sell higher risk higher pay higher riskier issues. If I’m wrong the worst that can happen is I make 6.5% a year.
Tim…at some point, deficits matter…currently, 1 out of every 5 tax revenue dollars (20%) is used to service our 36.4T national debt & 2T annual budget deficits. I think US & foreign investors are starting to demand higher interest for perceived higher risk IMHO.
I recently ran across this politics-free diagram showing where the US government got its money from in 2024, and where it went: https://www.visualcapitalist.com/breaking-down-the-u-s-governments-2024-fiscal-year/
It helped make it clearer for me what the relative sizes of the expenditures were. For example, I wasn’t aware that we spent slightly more on interest than on national defense last year.
Nathan,
Much of the spending ends up in US bank accounts. It’s a flood and helps sustain the rally in financial assets. Higher t-bond yields will cause stocks to reprice, and then, I speculate, the rally will resume.
deficits do NOT matter.
interest rates are moving higher on perceived higher inflation.